7 Reasons Why You Should Avoid Loan Apps in Nigeria

Here, we explain the reasons why you should avoid taking loans from online lending platforms or loan apps in Nigeria:

1. Extremely high-interest rates

What makes a lender qualify as a loan shark is the high interest rates that come with their loans. While Nigerian bank interest rates are mostly between 9%-11.130% per annum, these loan sharks offer loans with interest rates mostly between 15%-30% weekly or monthly. Although some claim to offer loans between as little as 2% – 5% — this is never the case. This means a borrower who accesses a N10,000 loan could pay between N11,500 – N13,000 weekly or monthly. For someone who is barely managing, he/she is left to not only pay up the principal + interest but will also pay extra charges with each passing day if he defaults as a penalty.

2. Giving up your BVN

Although online lending platforms sell their short-term loans mostly using the “collateral-free” caption, what they won’t tell until you start filling out a form on their app is that your BVN will be required in order to be eligible for a loan. According to them, the BVN is used in determining the creditworthiness of every individual who signs up on their platform. And while desperate borrowers might not be concerned about giving out their BVN details, financial institutions have repeatedly warned that the BVN is one’s “financial ID card” and it can be used to access some of your financial information/records and can also be used to orchestrate a fraud. What’s worse is that it can be submitted to the credit bureau in order to have your BVN blacklisted if at all you default. While this might not be much of a concern to you now, your credit rating will be negatively impacted which means chances of borrowing from your financial institution or carry out some more serious business transactions in the nearest future are slim since your credit rating is bad.

3. Unfethered access to your mobile device

Every loan app requires certain access in order to function on your phone. Although these apps should work without your access — it is their way of getting every sensitive information about you without really asking directly. These include but are not limited to your contact details, text messages, email accounts, social media accounts, media, camera, etc. This means that you must be willing to grant an online lending app access to use them as they deem fit. With this access, your contacts are extracted and contacted without notice if you default or have your picture posted on social media platforms or worse; have your social media hijacked since you granted them access to post on your behalf.

4. Harassment, humiliation and intimidation

With each passing day, online lending platforms have become more notorious in the art debt recovery by harassing, humiliating and intimidating loan defaulters. Whether your reasons for defaulting are of serious concern or not, online lending platforms can send libellous text messages to your contacts; brand you a wanted criminal who ran away with their company’s money. The humiliation is often much because long lost friends, family members, bosses, colleagues at work, religious colleagues, and siblings all of whose contacts you have saved to your phone, are likely to receive damaging messages about your person.

In some cases, one is likely to be threatened personally about having their details sent to the credit bureau for blacklisting if they fail to make repayment on time. And then there are constant phone calls that can be considered intrusive — all to remind defaulters to make payment.

All of these have been known to bring nothing but shame and humiliation to some borrowers and pushed many to the brink of suicide for being humiliated in terrible ways.

5. Lien on your bank account

Most people get angry and worked up when online lending platforms automatically make deductions from their bank accounts without their “consent” when in reality they agreed to the platform’s terms of use the moment they started using it. Having a lien placed on your account means a loan shark can legally make deductions directly from your account without having to write to your bank. Liens on accounts, as regards securing loans from online lending platforms, are activated the moment you enter your debit card details on their website or mobile app. While they may lure borrowers to enter their debit card to get paid or as a final means of verification, doing so means submitting every detail of your debit card to them from where they will automatically deduct not just their principal and interest you accrued over time.

6. Inability to develop a saving culture

A common, noticeable pattern with people who access loans from online lending platforms is their inability to save since they are mostly servicing high-interest loans they accessed from these loan sharks. Their inability to save stems from repaying loans + interest, which often leaves them with little or nothing in the end and have to depend on more loans in other to get by. For some people, they borrow from some other loan sharks to settle another and get caught in a web of financial struggle. The cycle can be very difficult to break for those who want to get out but since they don’t have enough no thanks to constant high-interest debts that are being serviced, they must continue to remain subservient to these loan sharks who profit off them and leave them in worse financial mess than they were.

7. Addiction

Getting constant loans from fintech loan sharks can be somewhat addictive since the idea is similar to that of “free money” until one starts struggling to pay back. Getting used to them can be very addictive, particularly payday loans; meaning one might have to depend on multiple online lending platforms periodically — wait till one gets paid at work at the end of the month and pay off the debts then go back to borrowing again. The “wash, rinse and repeat” process with payday loans can be devastating to one’s finances, financial growth and personal life.